Friday, May 18, 2007

Contemplating Publishing Numbers & Dollars

May 18, 2007

I was perusing blogs a bit yesterday and swung by the blog of Dystel & Goderich Literary Agency. Agent Lauren Abramo had a piece containing a whole bunch of statistics about the publishing industry. Here's a sample:

"And do they sell well? The standards for success really do change from book to book based on any number of factors—category, author’s platform, size of the advance, size of the marketing budget—but everyone agrees that the majority of books fail to earn out their advances (meaning that the author’s royalties never accrue to the point that they actually earn more than they were paid up front). What percentage? An exact number is probably impossible to pin down, but it’s said that 80-85% of books published don’t earn out."

I'm just thrilled (facetiously) that nobody really knows. I'm trying to pin down these sorts of numbers for the clinical lab industry and it's no easier to find hard data on that either. But when I read that particular paragraph, the question that popped into my head was: "So what?"

Now, before business-savvy writers and my editor get all fired up to tell me that earning back your advance is a big freaking deal, that you don't get royalties until that advance is paid off, that your publisher pays real attention to whether--whoa, whoa, whoa. Hold on to that last thing I was starting to say for a second.

Disclaimer: As a businessman writer I want to earn out my advances. This makes my publisher happy. It makes me happy. It suggests that my editor/publisher made an intelligent and accurate guess (er, calculation) as to how many copies of my book would be ordered and sell (ignoring the fact that it's a self-fulfilling prophecy most of the time; if they give you a $1000 advance and print 800 copies, most of the time you won't sell 80,000 copies because, well, they don't exist and they can't be found even if someone wanted them, and your publisher had very little to lose so they didn't go all hellbent to make sure they sold so they could earn back their investment, and booksellers weren't hearing buzz about how hot this book was and it had a first printing of 80,000 copies, which is stamped all over every Advanced Reading Copy and promotional material crowing: Yes, we're hot on this book, we think it's going to sell tons, we threw a lot of money at it...).

Anyway, my "So what?" question's follow-up was this: The book needs to earn back its advance and all of the publishers investment. In other words, the publisher paid, say, $1500 advance, then they printed up 2000 copies which cost them X dollars, say just for grins, $3 per copy which we'll say includes layout, printing and cover art, which comes to $6000. So they've got an upfront investment of $7500, not including whatever promotion expenses they might do, which in most cases would be a catalogue that includes your book and all the other books in that selling period, which they then mail to bookstores and distributors. Warehousing, UPS, blah, blah, blah, before you start adding in their editors' paychecks, the secretary's paychecks, the publishers mistress's condo in Barbados and the electric bill for the publisher's offices.

So, assume those 2000 books sell for, say, the price of a trade paperback, about $12.95. If you only sold 50%, in other words, 1000 copies, there is, above the line, $12,950 coming in. Of course, some of that is sucked up by the bookstores, some of it by the distributors. How much does the publisher actually get? I honestly don't know. I'm guessing 40% (and if someone actually knows, please let me know). So 40% of $12,950 is $5180.

See, the publisher actually is in the red, if that 40% number is even close. Of course, from the writer's point of view, we could argue that the books actually have earned back their advance, it's the publisher that hasn't earned back their expenses yet.

The point isn't that I'm shirking my responsibility as an author or bemoaning the woeful state of the publishing industry. I'm just trying to be precise in my thinking about the economics. You get some journalist at the New York Times or Publishers Weekly saying, hey, 85% of books don't earn back their advance, and I'm thinking, as a guy who's spent the last year writing intensively about business issues and reading dozens of SEC filings and company annual reports (yes, I love to read fiction), maybe they're asking the wrong question. They're saying that the author who's getting as 12% royalty and was paid an advance of $1500 didn't sell enough copies of his book that earns $1.40 a copy to pay off that $1500 advance (in most cases they're talking about authors who earned advances that run about $150,000 anyway, aren't they, because the average newspaper reader doesn't give a damn about a writer earning a $1500 advance, Christ, why doesn't that fool go work at McDonald's, he'll make more money).

But from a business point of view, the publisher may not necessarily be looking at things that way. They may be looking at the overall picture, including the money they pull in off foreign sales if their contracts run that way, or the money they get on a split for movie deals, or audio sales, etc. Just looking at: "authors don't earn back their advance" may quite well be the story of blind men and the elephant. Describe an elephant: the blind man holding the trunk concludes the elephant is like a snake; the blind man holding the leg assumes it's like a tree; the blind man holding the ear assumes it's like a bat; the blind man holding the tail assumes it's like a vine, etc.

And for god sakes, if you've got real data here, share it with me. I'd love to know.

I think the point I was making (assuming I had one) is that you're always hearing talk of "the authors didn't earn back their advance," blah, blah, as if the author advance is the biggest amount of money being spent by the publisher. In fact, I'm fairly certain that publishers not only are earning the expenses they make to get a book published, they also make a profit in order to pay all their staff, their rent/mortgage, their utilities, health benefits, benefits, etc., AND have a profit left over.

Taking the author out of the financial picture as a whole doesn't make sense from a business point of view. 85% of authors don't earn back their advances. Really? Then publishers are going broke?

No. Author advances are part of the above-the-line expenses to get a book published and if paying back the author advance is the LAST thing a publisher intends to do with the money that comes in (very likely) then sure, maybe the authors don't "earn" back their advances.

But if I'm Publisher X and I invested $10,000 (including the author advance of $1000) to produce A REALLY GOOD BOOK, and I've initially earned back $9000, it's pretty easy to scapegoat the author and say, hey, the author didn't earn back his advance.

You won't hear a publisher say, Hey, the electric company didn't earn their $1000 on A REALLY GOOD BOOK. They get paid no matter how much the book makes. So does the printer and presumably the cover artist. It's the way the industry and media covers the business of publishing that puts the onus of responsibility on the writer.

Now, if the publisher spent $10,000 on the book ($1000 to the author) and only earned back $5000 total through sales, is it still the authors fault or did the publisher do something wrong with their business plan? Did they print too many books? Should they have negotiated a better fee with the printer? Paid their cover artist less? Gotten a building with cheaper rent? Paid their editors less?

Oh dear, I'm suggesting we try to look at publishing as a business as a whole. Sorry. Guess that's not allowed.

Great post. I wish I had some numbers to share, but I'm not at that stage yet. My hunch is that publishing is much like the film industry, in that everyone cries poor, but people are getting paid and the suckers are the ones who take a percentage of the NET profits.

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